An Individual Retirement Account (IRA) allows you to save money for retirement in a tax-advantaged way.
IRA Type | IRA Details |
|---|---|
Traditional IRA | Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances, and generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distributed. Withdrawals prior to age 59 may result in a 10% IRS penalty in addition to current income tax. |
Roth IRA | If you suspect that your taxes will be higher after your retire, then a Roth IRA may be the right option for you. The money you contribute to a Roth IRA has already been taxed, so when you retire and start withdrawing, the money – and any potential growth in the account – may be tax free. Roth IRAs are not tax-deductible, but offer a lot of flexibility including the option of contributing to this account after your retire and keeping it open for as long as you live. Withdrawals prior to age 59 or prior to the account being opened for five years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. |
Rollover IRA | A Rollover IRA is a Traditional IRA that is often used by those who have changed jobs or retired and have assets accumulated in their employer-sponsored retirement plan, such as a 401(k). Transfers can occur either through a direct transfer or by a check, which the custodian of the distributing account writes to the account holder who then deposits it into another IRA account. |
